Bank Account Deactivation Rules May Change: SBI’s Proposal to RBI

India’s largest public-sector bank, State Bank of India (SBI), has suggested changes to the Reserve Bank of India (RBI) regarding the deactivation of bank accounts. The current rules focus solely on financial transactions for determining whether an account remains active, but SBI has urged the inclusion of non-financial transactions like balance checks to mark accounts as operational.

SBI Chairman C.S. Shetty emphasized that this adjustment is crucial to address the growing number of inactive accounts, particularly those linked to government welfare schemes.

Challenges with Inactive Bank Accounts

Many account holders, especially beneficiaries of government programs, perform only a few transactions. After receiving funds, these accounts often see limited activity, leading to their classification as inactive.

According to existing regulations, a bank account becomes inactive or “inoperative” when no financial transactions occur over a specified period. Once inactive, customers cannot deposit or withdraw money without reactivating the account through the bank’s procedures.

This has created challenges for both banks and account holders, particularly for those who rely on these accounts for occasional or non-financial purposes.

SBI’s Proposed Solution

Shetty explained that even non-financial activities, such as checking account balances or generating account statements, indicate that the account holder is actively monitoring their account. SBI believes that these actions should be enough to classify an account as active.

“We have requested RBI to recognize non-financial transactions as a criterion for keeping an account active. It will ensure a better understanding of account holders’ behavior and reduce unnecessary deactivations,” Shetty said.

RBI’s Stand on Inactive Accounts

The RBI has been pushing banks to address the issue of inactive or frozen accounts. It recently directed banks to resolve these matters promptly and submit quarterly progress reports.

In response, SBI launched a special campaign over the weekend to address inoperative accounts. However, the exact number of inactive accounts within the bank remains unclear.

What Happens When an Account Becomes Inactive?

An inactive bank account is one where no transactions occur for an extended period, as defined by RBI guidelines. Once deactivated, customers cannot perform basic functions like withdrawals or deposits until the account is reactivated.

The proposed inclusion of non-financial transactions could simplify the process, allowing account holders to retain access to their accounts while avoiding unnecessary complications.